June 3, 2014

The Latest Obamacare Glitch and Why It's (Probably) No Big Deal

A new Affordable Care Act controversy may be on the way. It seems a substantial fraction of people who bought private insurance through an Obamacare marketplace submitted personal information that’s inconsistent with federal records. The government needs that data in order to determine eligibility for the tax credits that help defray the cost of coverage. In those cases where discrepancies indicate that people filed genuinely incorrect information—if people misstated their incomes, for example, or their citizenship status—then their subsidy amounts are probably wrong, too. Those people could be getting too little money or, yes, they could be getting too much.

The inconsistencies first came to light a few weeks ago, via a story by Amy Goldstein and Sandhya Somashekhar in the Washington Post. The problems could very well relfect clunky program design, poor implementation, or some combination of the two. But the "vast majority" of people with these applications appear to be getting the proper amount of financial assistance, senior Administration officials tellThe New Republic.The government just hasn't been able to verify their status.

To some extent, these kinds of discrepancies are inevitable, given the complex standards for eligibility, the possibility of human error, and the need to prevent fraud.

Consider how the enrollment process works. You have to provide a whole bunch of information—the usual vital stuff, like your name and age and Social Security number, plus information about your income, citizenship, and residency status. By the time you are done, you have provided up to 21 different pieces of information if you're from a family of four. At that point, the federal enrollment hub—that is, the back-end system that works in conjunction with www.healthcare.gov and the state online marketplaces—matches application information with federal databases from multiple agencies, including the Internal Revenue Service, the Social Security Administration, and the Department of Homeland Security.

The idea is to verify applicant information, in real-time. And mostly that's what happened during open enrollment, at least once all of the consumer websites were working. But because the process is so complicated—and because people’s life circumstances sometimes change—the information that people supplied didn’t always match up with federal records. That was particularly true for income, since the data hub checked applications against (two-year-old) tax returns and (one-year-old) payroll stubs. Somebody who recently lost a job or got a new one, or went through a major life change like a divorce, or whose income simply varies a lot from year to year, could easily supply income information that was totally accurate but simultaneously at odds with the government's latest data.

The Affordable Care Act anticipates situations like these and addresses them. Rather than hold up those applications, creating a huge backlog and potentially scaring away people seeking insurance, Section 1411 of the law allows applicants to complete the enrollment process even if the information they submit doesn’t match up properly. In such cases, people may “attest” to the accuracy of the information they provided. If the data mismatch is about citizenship or residency—or if it is about income and of greater value than 10 percent—these people receive official notices, requiring them to provide new information or show that the original, submitted information is correct.

HHS officials tell the New Republic that the applications of about 2 million people have some kind of inconsistency—with about half because of discrepancies on reported income and about half because of discrepancies on citizenship or residency status. (A tiny number have other kinds of problems.) But that's not the same thing as saying 2 million people are getting incorrect subsidies.

HHS staff and contractors have been reaching out to applicants individually, by phone and mail, to deal with the remaining inconsistencies. So far, Administration officials say, the vast majority of immigration discrepancies they are seeing turn out to be paperwork issues—an applicant submitted an expired document, for example, or one letter was incorrect in the spelling of somebody's name. For the most part, officials say, the money is going to the right people, and in the right amounts. They're preforming due diligence, they say, but it appears there are not widespread problems. "Just because we are fact-checking a piece of information on a consumer's application, it doesn't mean there's a problem with that consumer's enrollment," says one senior official.

The officials say they expect that pattern to hold as they work through the rest of the application discrepancies, including those with income and residency data mismatches. That's based in part on what they’ve learned from officials who have dealt with eligibility issues in other government programs. Among other things, they note, it's a felony to lie on the Affordable Care Act application and most people are unlikely to risk the consequences. (Immigrants, in particular, would fear deportation; convincing even legal and eligible immigrants to apply for insurance is often a struggle for that very reason.)

Could the problem actually be a lot worse than Administration officials think—or are letting on? Sure. Even if it's not, there are undoubtedly some people getting the wrong amount of financial assistance. Those who are getting too much will have to pay the difference, presumably by next year's tax deadline. Those who are not getting enough are entitled to more assistance—and in many cases they need it, because they are extremely poor. The amounts might not be big in most cases. But there are bound to be some exceptions.

These kinds of problems are inevitable with a new program, which is one reason why the law gives the Secretary of HHS extra flexibility over enrollment in the first year. The question is how widespread the problems are—and how long it takes the Administration to fix them. As Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities, told the Post, “The longer it takes and the more months . . . go by, the more serious the consequences of any error that may have occurred.”

Note: This item has been updated to include more information about the law's requirements and the enrollment process.